We often need to take a loan to fulfill our business or personal needs. In this regard, we contact any friend, money lender or a bank. On the opposite side sometimes our friends or relatives need money and borrow it from us. In both the situations, we should make a contract, this kind of contract is known as Personal Loan Contract.
How to write Personal Loan Contract
The Personal Loan Contract is a legal document that is often called a promissory note, which contains a promise from one entity to pay a definite amount to the second party either on demand or on a fixed date that is written in the agreement.
Following points will be helpful for writing a concise and clear legal contract.
- This agreement can be negotiable or non-negotiable, so it should clearly mention on the top of the agreement.
- Fulfil all the legal requirements for a promissory note to make it legally enforceable.
- Define the amount of interest and installments including the interest.
- You can define that the loan will be paid in a single instalment, including the borrowed amount plus interest.
- You also can define an interest only instalment plan, in which the borrower will pay only the interest in instalments and will pay the principal amount in a single lump sum amount on the decided date.
- Start your contract with a title and then mention the names of the lender and borrower with their complete addresses.
- Add the negotiability of the contract.
- Design a clause to deal with late payment of a loan or installment of the loan.
- Mention the amount of loan that is provided to the borrower.
- The contract must be signed by both the entities along with the date and two legal witnesses.
- Each entity should have a copy of the agreement.
Create your own Personal Loan Contract by using the following template,